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Aiming to enable

Martin Terrell and Louise Mathias-Williams set out the lessons from the Public Guardian’s recent decision over severance applications.

‘This article was first published in Trusts and Estates Law & Tax Journal (October 2017) and is available at www.lawjournals.co.uk.

Practitioners involved with the ever-increasing demand for lasting powers of attorney (LPAs) may struggle to find judicial guidance on the finer points of drafting and practice. Details of cases are often hidden away in footnotes of textbooks or in obscure corners of the government website. It is therefore quite an event when 17 applications made by the Public Guardian have been dealt with in a single case, heard by District Judge Eldergill in April 2017. His impressive judgment was reported on 19 June 2017 in the case of The Public Guardian’s Severance Applications [2017].

The detailed judgment sets out the relevant law, and explains the respective functions of the Public Guardian and Court of Protection when dealing with LPAs, and in particular the role of the court where potentially invalid provisions need to be removed or severed. The judge considered each of the cases in turn. Several of the cases turn on very similar facts and so are only referred to in brief. The element which unites the cases, which span both property and affairs and health and welfare instruments, is the consistency of District Judge Eldergill’s approach in endeavouring to ensure that a donor’s intention as to how their affairs may be managed in the future is respected and upheld as far as the law will allow.

District Judge Eldergill refers (para 41) to Nugee J’s comments in Miles v The Public Guardian [2015]: … it is right that the Act should be construed in a way which gives as much flexibility to donors to set out how they wish their affairs to be dealt with as possible, the Act being intended to give autonomy to those who are in a position where they can foresee that they may in the future lack capacity to specify who it is that they wish to act for their affairs.

In considering each of the cases, clear efforts are made to give effect to the donor’s wishes where the Public Guardian considers that, in general, there are divergent instructions contained in an instrument which necessitate severance of a provision, in order to ensure that the instrument may then operate as a valid LPA.

The law

According to s9(2) of the Mental Capacity Act 2005 (the MCA), an LPA is not created unless:

s10 is complied with (ie where there is more than one attorney, they are appointed to act jointly, jointly and severally, or jointly in respect of some matters and jointly and severally in respect of others)

an instrument conferring authority of the kind mentioned in subsection (1) is made and registered in accordance with Sch 1

at the time the donor executes the instrument, they have reached 18 and have capacity to execute it.

Where an instrument is made and registered in accordance with Sch 1, this requires that an LPA:

be the prescribed form

complies with para 2 (requirements as to content of instruments)

satisfies any prescribed requirements in connection with its execution.

In terms of flexibility to see past an obstacle in the instrument, para 3(1) of Sch 1 to the MCA provides that, if an instrument differs in an immaterial respect in form or mode of expression from the prescribed form, it is to be treated by the Public Guardian as sufficient in point of form and expression. Paragraph 3(2) allows the court to declare that an instrument which is not in the prescribed form is to be treated as if it were, if it is satisfied that the persons executing the instrument intended it to create an LPA. These provisions are designed to ‘save’ LPAs where there are minor defects or oversights in the actual forms, such as missing dates or incompleted boxes. The applications dealt with in this judgment concerned cases where the instruments had been adapted, as a result of which the Public Guardian considered that they had not been made in accordance with Sch 1. As a result the Public Guardian could not register the instrument and had to apply to the Court of Protection. Section 23(1) of the MCA provides that the court may determine any question as to the meaning or effect of an LPA or an instrument purporting to create one.

Under Sch 1 para 3, if the court determines that an LPA contains a provision which is ineffective as part of an LPA, or which prevents the instrument from operating as a valid LPA, then the court must either:

notify the Public Guardian that it has severed the provision

direct them to cancel the registration of the instrument as an LPA (s19).

This provision, together with s23(1), relates not only to severance of clauses but also allows the court to confirm that a provision is effective and therefore that the instrument must be registered. In this case the judge went as far as he could to use the court’s powers to enable the donors’ wishes to be carried out. Some of the main issues which were brought before the court were:

A failure to select the correct type of appointment

It is for the donor to choose whether they wish their multiple attorneys to act:

jointly

jointly and severally

jointly in relation to some matters and jointly and severally in relation to other matters.

MC

The donor specified that her attorneys should act jointly and severally, but gave express instructions under s7 of the form that:

Any financial decisions up to the value of £150 can be made independently by my attorneys. However, any financial decisions over this amount must be agreed upon by both my attorneys.

The Public Guardian argued that the instructions should be severed from the document due to their being incompatible with the nature of the appointment of the attorneys to act jointly and severally. Under s9(4)(b) of the Act the authority conferred by an LPA is subject to any conditions or restrictions specified in the instrument, and the instructions and box ticked were therefore at odds with one another; the option to appoint attorneys jointly in relation to some matters and jointly and severally in relation to others would have correctly reflected the donor’s instructions.

In considering the donor’s intentions, the judge gave greater weight to her instructions than to the fact the wrong box had been ticked, referring to this as ‘simply an error in completing the form’, and he concluded that it would be ‘wrong in principle to excise the condition or restriction in s7 when it is the box on page 4 which is Athe error’. An order was made allowing severally. However, she also included preferences (rather than instructions, as above) that her attorneys could act ‘severally except on investment decisions of £50,000 or more where they should act jointly’. The Public Guardian contended that the section needed to be severed because it was ‘incompatible with the nature of the appointment of the attorneys to act jointly and severally’.

District Judge Eldergill confirmed that severance was unnecessary because the donor had expressed a wish concerning investment decisions relating to £50,000 or more. In acting in the donor’s best interests the attorneys would naturally need to consider the donor’s specific wishes, but they are not bound to act in accordance with them. The judge noted that the donor’s wording was contained in preferences rather than instructions, ‘and that does make a difference’, presumably allowing for a more relaxed outcome which did not necessitate the making of an order as in MC.

JG2

In the case of JG2 the donor specified that her attorneys should be appointed jointly and severally to act on her behalf in connection with her financial affairs. However her express instructions at s7 were:

My attorneys must make decisions jointly in respect of the sale of my property at X Lane, Leicester... including any property that I may be residing in that is considered as my main residence, jointly.

The Public Guardian again applied for this wording to be severed because it was considered incompatible with a joint and several appointment. As before, the weight given to the wrong box having been ticked was minimal; the donor’s intention, as presented in her instructions, was explicit, and again it was thought wrong to excise the condition in s7 ‘when it is the box on page 4 which is the error’. As these cases related in effect to the ticking of the wrong box in s4 of the form, they could be saved by Sch 1 para 3 of the MCA. As the Public Guardian also has a discretion under this provision, the Public Guardian may in future take a more lenient approach to such cases and to registering instruments without reference to the court.

Desire to support a third party

A donor’s wish to ensure that other individuals close to them are financially supported also unites several of the cases which were considered. In each of these cases District Judge Eldergill commented on the factors which inform the concept of best interests. He confirmed that, when considering what constitutes a best interests decision for the donor, the exercise cannot omit, and it cannot be divorced from, the donor’s desire to ensure a loved one is protected, particularly where they have endeavoured to make sure that the loved one should be considered a firm priority when decisions are made. In fact, establishing what is in the donor’s best interests is deeply couched in the attorneys ensuring that this third party is properly considered.

JG

The donor in JG included the preferences section of the instrument:

‘I would like my attorneys to consider Thomas G (my son) as my main priority when making decisions’. The Public Guardian argued that the words should be severed because they were incompatible with s1(5) of the MCA that any act done or decision made must be done or made in the donor’s best interests. In other words, the provision was for the benefit of another person, not the donor, and could not therefore be in the donor’s best interests. The judge held that a person’s best interests had to be considered in the widest sense, including the donor’s connections with others. Furthermore, the donor had not included this wording in the form of an instruction, rather ‘all she [had] done, very sweetly, [was] to specify that she would "like" her donees to consider her son as her main priority’. The judge went on to confirm that:

… the Act entitles her to make a written statement concerning her wishes and feelings (4(6)(a)) which the donees must consider when deciding what decision is in her best interests. She has done no more than exercise that right.

This did not empower or direct the attorneys to act in a particular way, but rather informed them of the donor’s wishes in dealing with the estate which would for instance support them in making an application to the court for financial provision for Thomas.

PG

A donor’s wish to ensure another individual’s needs were met was also addressed in the case of PG. Here, the Public Guardian also argued for severance on the basis that the donor’s instructions, which required her attorneys to ‘ensure that IBG [the donor’s daughter] who is unable to make decisions for herself because of her disabilities that her needs are met’, were incompatible with s1(5) of the Act. The donor’s views as to what constituted her best interests were clear:

… that [her] daughter is cared for appears to be her most important wish and feeling, and no doubt her core personal belief and value.

The judge did not therefore agree that the condition was ‘on its face contrary to the requirements of section 1(5)’ because it would be in the donor’s best interests to know that her ‘wishes and feelings for her daughter [would] be honoured if she [became] incapacitated’. The condition would not prevent the instrument from operating as a valid LPA. The judge went on to tackle the question of whether the attorneys could meet the daughter’s needs under the LPA or:

… whether providing for the needs of the donor’s daughter from her estate will involve making gifts to her daughter in excess of those permitted by s12 so as to require a court application and order before they can be made.

The judge notes the distinction between the MCA provisions relating to maintenance by attorneys acting under an LPA and the earlier provisions relating to enduring powers of attorney (EPAs) under the Enduring Powers of Attorneys Act 1985 and preserved by Sch 4 MCA. The EPA jurisdiction contains an express power for an attorney to:

… act in relation to himself or in relation to any other person if the donor might be expected to provide for his or that person’s needs.

The MCA is silent on the same subject where LPAs are concerned and only permits gifts within the strict limits allowed by s12. Any other gifts must be authorised by the court under s23(4). Strictly speaking, any provision for another person, not for consideration, is a gift and is treated as such for tax purposes. An attorney also has a fiduciary duty not to benefit himself or herself or another person. The judge did go to some effort to stretch the concept of best interests in a pragmatic and compassionate manner where (para 152(f)):

… marriage and equivalent relationships typically create a relationship of interdependence and mutual support, and dependence is commonly created by the presence either of children or a family member with a significant disability.

At first sight this does reinterpret the legislation. However, this decision builds on earlier decisions of Senior Judge Lush in the cases of Re Bloom [2012] and Re Strange [2012], where he allowed provisions relating to the maintenance of the donor’s spouse. In the case of JG, District Judge Eldergill considered that the donor’s history and wishes (including the wishes expressly stated in the LPA) relating to the maintenance of a disabled child created an equivalent obligation which the attorneys could implement in practice. The decision does, though, leave further questions unanswered. How far for instance can attorneys go in providing for other dependents, such as grandchildren and the payment of school fees? What happens where the attorney is also the recipient and has a conflict of interest in the decision? In practice, it is likely that provisions in an LPA providing for maintenance will still be referred by the Public Guardian to the court for consideration on their individual merits.

Health and welfare instruments

A commitment to giving effect to the donor’s wishes is further demonstrated by several health and welfare cases where the Public Guardian also sought to sever various provisions from the instruments.

JR

In the case of JR the Public Guardian argued, as in the financial matters considered above, that the donor’s chosen wording was incompatible with the joint and several appointment which had also been selected. Here, the donor had authorised her attorneys to give or refuse consent to life-sustaining treatment (ie she had completed Option A) and she had also set out specific instructions:

If it is the case of making a life or death decision then please make that decision together.

As in MC and SR, consideration was given to the weight to be attached to the fact that the wrong box had been selected on p4 of the instrument. It was held that ‘not much’ weight should be given and this was even more the case ‘given that this is a life or death matter’. The judge concluded:

… it is far more important to give weight to the donor’s intention that both donees agree on life or death decisions than it is to give weight to ticking the wrong box.

SHH

The donor’s clear intention was also apparent in the case of SHH, where her signature against Option A, giving her attorneys authority to give or refuse consent to life-sustaining treatment, was not correctly witnessed. The witness had failed to print her name and include her address. As a result, the donor’s wishes in connection with the way in which her attorneys should exercise their authority under Option A were considered by the Public Guardian to be incompatible with the attorneys’ joint and several appointment which had also been specified. The Public Guardian argued, given that this section had been incorrectly executed, that Option B applied as the default position. That is, the attorneys did not have authority to give or refuse consent to life-sustaining treatment and the donor’s ‘preferences’ needed to be severed.

It was held that the instrument could be rectified by the court as the witness had printed her name and address elsewhere in the document and the intention when completing the form was clear. Option A could therefore take effect.

Conclusion for practitioners

These judgments suggest a turning point in prioritising the donor’s true intention and hopes for the way in which an attorney may exercise authority on their behalf beyond the strictly legal implications of completing an instrument incorrectly, or expressing a wish which jars with a literal interpretation of the wording contained in the MCA. The judge commented at para 41 of his judgment that:

The Act is an enabling Act and the Public Guardian and the court should be as enabling as is legally possible.

These cases help to support the way in which a donor can be empowered in creating an LPA. Where a written statement of wishes and feelings is included by the donor (for example, the wish to support a third party), it does not need to compromise the validity of the instrument and is to be regarded with greater weight over and above, say, the more standard elements of the instrument. Indeed, such a statement helps to closely tailor an LPA to the donor’s individual circumstances, and it becomes a more genuine voice for a donor who lacks capacity and enables the attorneys to have the necessary tools to exercise their authority for the donor sensitively. It also goes without saying that LPAs are not always straightforward and careful thought and good advice are essential in every case.

We have one of the largest nationally recognised specialist Court of Protection teams in the country, offering practical advice and personal service in situations where someone needs help managing their finances.

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I agree to be 'opted in' to receive the Thomson Snell & Passmore communications I have selected above. I understand that this means they will send me relevant content based on the options I have selected. \n\n If you do not wish to receive promotional material from Thomson Snell & Passmore please contact us using the following link: info@ts-p.co.uk

I agree to be 'opted in' to receive the Thomson Snell & Passmore communications I have selected above. I understand that this means they will send me relevant content based on the options I have selected. \n\n If you do not wish to receive promotional material from Thomson Snell & Passmore please contact us using the following link: info@ts-p.co.uk